The annuity specialist said it believes the simplified route is key to tackling the “advice gap”. The firm said the new service is initially being offered to other pension providers, who are facing growing regulatory demands to increase the levels of support they offer clients.
Pension savers using the service will be provided with regulated advice as defined by guidance issued by the regulator earlier this year, meaning it will include a personalised recommendations.
Those found to have debt issues or more complex financial needs, such as inheritance tax planning, will be able to access a higher level of advice.
Recommendations on how to use pension savings to generate income, access lump sums or keep funds invested will be based on people’s attitude to risk and capacity for loss. The firm stated that charges will be transactional and clients not acting on recommendations will not have to pay.
In January of this year the FCA issued guidance intended to help firms not to unwittingly stray into full advice. It defined the barrier between generic guidance and regulated advice as being when a personal recommendation is made, even if this results from a ‘simple’ process.
Just Retirement is the first provider to formally launch a simplified advice firm, though others have discussed potentially moving into this area in the wake of Budget pension freedoms, potentially through partnerships with advisers.
Royal London said in November last year it was mulling options for a ‘discounted’ advice option for this that fills in a perceived gap between free Treasury guidance and full advice.
Isobel Langton, chief executive of Royal London Intermediary, later revealed to FTAdviser the insurance giant is in informal discussions with advisers over an impartial service to those not sufficiently catered for by Pension Wise, with a launch likely later this year.
Stephen Lowe, group external affairs and customer insight director at Just Retirement, commented that while wealthier pension savers tend to seek professional advice, the concern is for ‘middle Britain’ savers with more modest pensions who are often feel excluded from advice.
He said the service is designed for pension providers who want to ensure their pension savers - particularly those resistant to the idea of shopping around - are more actively engaged with the decision-making process at retirement.
“The heat is on pension companies to do more to help customers if they want to satisfy the regulator - the majority of these middle Britain pension savers won’t have complex requirements so a simplified advice service should be a good option,” added Mr Lowe.
At the end of March, Michelle Cracknell, the Pensions Advisory Service’s chief executive, told FTAdviser that more advisory businesses should offer an ‘entry level’ retirement proposition which would overcome the main barrier to advice, which is that consumers believe it is too expensive.
The Savings and Investments Policy project, a coalition of over fifty firms and consumer groups, has proposed providers should be able to give generic ‘guidance’ which includes a tacit recommendation without straying into advice, to help rebuild consumer trust in long-term savings.
Carlton Hood, Old Mutual Wealth’s customer director, said: “The kitemark would be for everyone to use and would include sensible proposals that the 90 per cent of ‘people like you’ should consider in certain situations.”
Just Retirement is one of the specialist firms that was hit hardest by the announcement at the Budget last year, with its market capitalisation falling £529m from £1.3bn to £771m at the close on the day. Resilient results boosted by bulk annuity deals, have seen value rise to around £840m.
peter.walker@ft.com
Additional reporting by Ashley Wassall
